Big Defense Contractors Duel for Missile Defense Contract

by: Matthew Potter
February 1, 2011

Category: Alaska, Boeing, Business Line, Companies, Contract Awards, Department of Defense, development program, Events, Federal Budget Process, Lockheed Martin, logistics, MDA, missile defense, northrop grumman, Northrop Grumman Corp., Raytheon, Services, States | RSS 2.0

Since Desert Storm the United States has spent billions on developing different missile defense systems. While they have invested in more exotic systems such as the Air Force’s Airborne Laser (ABL) which uses a large chemical laser on a Boeing (BA) 747 to engage long range missiles the majority have been based around ground or ship launched interceptors. One of the largest programs and a priority of the previous George W. Bush Administration was the Ground-based Midcourse Defense system.

At one point called the National Missile Defense (NMD) system this consists of several silo mounted interceptors in Alaska supported by a collection of radars and other sensors across the world. The new Obama Administration canceled the expansion of the program which included more missiles in Alaska as well as building a site in Europe but has continued to maintain and keep ready the existing parts of the program.

The primary contractor on the systems has been Boeing and this has included a contract to maintain and run the deployed missiles and radar. This contract is coming up for renewal and the Missile Defense Agency (MDA) has decided to compete it. The contract has an initial value of about $600 million and has attracted interest from the major U.S. defense contractors.

Boeing obviously plans to try and win their existing work and has teamed with Northrop Grumman (NOC) to submit a proposal. Northrop has worked with Boeing since the Nineties on the system as it was developed, tested and deployed. As the incumbents they do have extensive experience with the system.

Lockheed Martin (LMT) and Raytheon (RTN) form the other team that has so far submitted a proposal. These two companies have worked extensively together on Army and Navy missile defense programs such as THAAD, PATRIOT and AEGIS. There teaming to try and win this contract away from Boeing is only natural.

The total value of the contract if all options are exercised could be as much as $10 billion. In a time when it looks like the U.S. defense budget may be flat or even decline large support contracts like these are attractive to many companies.

The MDA is hoping that with competition they will be able to get a better deal to maintain the system and the fact that they have attracted at least two bids seems to indicate there will be some price variation that must be balanced against technical capability and past performance.

The source selection will take several months and there is always a chance of a protest by the losing team. If defense funding does decline competition for these contracts will become more fierce leading to potential delays for the government in awarding work to the winner and saving money compared to the current contract.

Photo from Irish Typepad’s flickr photostream.

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